Trillion-dollar coin, 14th Amendment: Dems, academics float radical options for Biden in debt ceiling standoff

close

Video

Biden, McCarthy spar over possible debt ceiling shutdown

Princeton University political scientist Dr. Lauren Wright breaks down the debate over the debt ceiling between President Biden and Kevin McCarthy on 'Fox News Live.'

Amid a looming showdown over raising the debt ceiling, Democrats in Congress and liberal lawyers, economists, and academics outside government are pushing ideas to address the debt limit without needing to hear Republicans' concerns.

Many of these ideas are unconventional, proposing for the White House to circumvent Congress unilaterally. Some observers, for example, have called on the Treasury Department to mint a new $1 trillion platinum coin and deposit it at the Federal Reserve. The money would allow the federal government to fund more spending in order to finance its obligations.

Rep. Rashida Tlaib (D-Mich.) and Willamette University law professor Rohan Grey are among those who've backed such an idea, which has increasingly gained prominence in recent weeks. Treasury Secretary Janet Yellin recently dismissed the minted coin as a "gimmick" that the Federal Reserve may not even choose to accept.

Treasury Secretary Janet Yellen in Washington, DC October 4.

YELLEN REJECTS MINTING $1T PLATINUM COIN TO AVOID US DEBT CEILING AS A 'GIMMICK'

Other ideas being floated include invoking the 14th Amendment to the U.S. Constitution, which says the federal government's public debts must be repaid. "Section 4 of the 14th Amendment says the threat to default is itself unconstitutional," Harvard law professor Laurence Tribe told the Washington Post, making a legal argument for Biden essentially ignoring the debt limit. 

Here are five other ideas being pushed by some experts and White House allies to bypass Congress:

• Selling federal land to raise cash quickly 
• Breaking the debt limit by declaring it would violate already enacted spending laws to stop borrowing money
• Asking the Federal Reserve to send ahead of time to the Treasury the income from interest payments made on government bonds that the Fed has been holding
• Issuing bonds that keep paying interest without a maturity date that could be sold into the secondary market and bring in cash to the government without counting against the borrowing limit 
• Buying back government bonds issued with lower interest rates that are now available on the secondary market for less than face value because the Federal Reserve has since raised interest rates 

"These aren't technical problems, but problems with politics and perception: The people in the administration are uncomfortable violating norms of how things are done," J.W. Mason, an economist at the City University of New York who supports some of these ideas, told the Washington Post. "The problem is that everything in this space is a gimmick. That's the nature of the problem. It's just a question of which gimmick you prefer."

Fox News Digital reached out to the White House for comment on these proposals. A spokesperson pointed to recent comments by Biden administration officials dismissing such ideas.

House Minority Leader Kevin McCarthy (R-CA) answers questions during a press conference at the U.S. Capitol on January 09, 2020 in Washington, DC. McCarthy answered a range of questions related primarily to the House articles of impeachment being sent to the U.S. Senate.  (Win McNamee/Getty Images)

HOW A GROUP OF DEMOCRATS AND REPUBLICANS COULD BYPASS MCCARTHY AND LIFT THE DEBT CEILING

"We're not considering any measures that would go around Congress," White House press secretary Karine Jean-Pierre told reporters last month. "Congress must act. Both Republicans and Democrats in Congress have repeatedly raised the debt ceiling, including three times under the last president … and we believe they need to do that again."

President Biden and administration officials have insisted Congress pass a "clean" increase of the debt ceiling without any other budget changes or concessions to Republicans, many of whom say they won't back a debt limit hike unless it includes attached spending cuts or fiscal reforms.

Like the White House, Democrats in Congress also want a clean debt limit increase. To that end, some have reportedly been discussing a procedural tool to force a debt ceiling hike to the House floor by circumventing conservatives and House GOP leadership. The obscure process, known as a discharge petition, requires a majority of the House — 218 signatures, regardless of party — to move a bill from committee to the floor for a vote.

"A discharge petition would only take myself and four of my colleagues on the GOP side to sign with Democrats, if that's necessary," Rep. Brian Fitzpatrick (R-Pa.), co-chair of the bipartisan Problem Solvers Caucus, told CNN.

While the effort is seen as unlikely to work or even be attempted, it's another indication of lawmakers and like-minded academics seeking a way to raise the debt ceiling without engaging Republicans over their budgetary concerns.

WASHINGTON, DC, MAY 24 U.S. Rep. Pramila Jayapal (D-WA) (L) speaks as Rep. Sheila Jackson Lee (D-TX) (2nd L) and Rep. David Ciclline (D-RI) (R) listen during a news conference to denounce a meeting between the Justice Department and FBI officials and Rep. Devin Nunes (R-CA) and Rep. Trey Gowdy (R-SC) May 24, 2018 on Capitol Hill in Washington, DC. (Photo by Alex Wong/Getty Images)

DEMOCRATS PUSH TO ELIMINATE THE DEBT CEILING, ALLOW UNLIMITED GOVERNMENT BORROWING

"Democrats want to get rid of the debt ceiling and give Uncle Sam an unlimited credit card," said Stephen Moore, a senior fellow at the Heritage Foundation and an economist with FreedomWorks. "That would be financially catastrophic."

Some Democrats have openly expressed support for the discharge petition. When asked whether he'd endorse the idea," Rep. Hank Johnson (D-Ga.) told the Hill, "If it's a clean debt ceiling — in a heartbeat."

However, economists who spoke to Fox News Digital expressed concern about the petition and other ideas being floated that don't involve both parties coming together to address the debt ceiling and GOP budgetary concerns.

"The various workarounds on this issue being suggested by some Democrats all have problems and would be accompanied by prolonged market uncertainty," said Desmond Lachman, senior fellow at the American Enterprise Institute. "There would seem to be no realistic alternative but for the Democrats and Republicans to reach an early deal and spare the U.S. public from adding to the already many recession risks."

Douglas Holtz-Eakin, president of the American Action Forum, grouped these so-called workarounds into two categories: "one-time measures that raise some cash but merely delay the inevitable" or "ad hoc procedures for which there may be no legal basis or hope of operational feasibility."

Because these ideas to circumvent Republicans or Congress altogether are unlikely, Democrats will need at least some Republican votes to raise the debt ceiling — meaning a compromise of one kind or another.

"There is no disagreement about the importance of honoring the debt obligations," said Holtz-Eakin. "The only disagreement is over whether there should be a change in the outlook for spending and deficits, and I believe there should be no disagreement on that issue, either."

House Speaker Kevin McCarthy (left) and President Joe Biden (right). (AP)

MCCARTHY SAYS HE SEES AN 'OPPORTUNITY TO COME TO AN AGREEMENT' ON DEBT CEILING AFTER 'VERY GOOD' BIDEN MEETING

President Biden and House Speaker Kevin McCarthy (R-Calif.) met on Wednesday to discuss the debate ceiling issue. While no agreement was reached, McCarthy described the meeting as a "very good discussion" and said he sees an "opportunity here to come to an agreement."

Still, McCarthy said Republicans oppose a clean debt limit hike without attached spending cuts to ensure a sounder fiscal position for the country moving forward. However, he noted cuts for social programs like Social Security and Medicare are off the table.

The country compiles deficits when government spending exceeds incoming revenues, which come mainly from taxes. The current debt is the accumulation of annual deficits over decades. Raising the debt limit (also known as the debt ceiling) doesn't allow for new federal spending but instead allows the Treasury to borrow additional funds to cover expenditures already approved by Congress.

Late last year, lawmakers capped the borrowing limit at $31.4 million, which the federal government proceeded to reach last month. Yellen subsequently told congressional leaders that the Treasury can take "extraordinary measures" to pay the country's bills on time until at least early June, by which time both parties hope to reach some sort of deal.

However, there's debate over what exactly would happen in the event the debt ceiling isn't raised by then. One risk is that the U.S. defaults on its debts, a scenario that would likely have huge financial reverberations worldwide.

Speaker of the House Kevin McCarthy, R-Calif., conducts a news conference in the U.S. Capitols Statuary Hall on Thursday, January 12, 2023. (Tom Williams/CQ-Roll Call, Inc via Getty Images)

MCCARTHY ON BIDEN DEBT CEILING MEETING: A TRUE 'NEGOTIATION'; GOP WILL 'UNITE BEHIND ONE PLAN'

"A U.S. government debt default would be a major U.S. and world economic event that could shake world financial markets and heighten the risk of a deep recession," said Lachman. "Such a default would imply that the world's largest sovereign debtor could not be relied upon to meet its commitments. This is the last thing that we need at a time that both the U.S. and the world economy could be on the cusp of an economic recession."

Lachman noted that a similar debt showdown in 2011 showed that even if the U.S. doesn't ultimately default on its debt but reaches close to the deadline without an agreement, markets can be shaken by uncertainty and the country's credit rating can be downgraded, adding to the government's borrowing costs.

"For this reason, it is essential that Congress and the Biden administration put country ahead of narrow political interests to reach an early compromise on this issue," he added.

However, other economists don't see the situation nearly as dire for the country.

"The chances of a debt default are about 0.01% — it isn't going to happen, even if they don't raise the debt ceiling," said Moore, who argued that if the government couldn't borrow more to meet its obligations in full and on time, it would force Washington to operate on a balanced budget until the debt ceiling is raised.

Senate Majority Leader Chuck Schumer, D-N.Y. (AP Photo/J. Scott Applewhite)

DEBT CEILING INCREASE SENDS DEMS INTO FULL APOCALYPSE MODE: ‘CHAOS,’ ‘RECESSION,’ ‘GLOBAL FINANCIAL CRISIS’

He described a scenario in which the government would create a priority list, paying the debt, social security, Medicare, and other programs but not financing, for example, certain clean energy programs while allowing, potentially, the Education Department to shut down for a few weeks.

"I'm not advocating for that — I want to see a compromise that raises the ceiling with the condition of spending cuts," said Moore. "But let's be clear: This isn't Armageddon. The threat to the economy is when we raise debt ceiling without any plan to get out of debt — Democrats have the whole thing backward."

A recent Rasmussen survey found that a majority of likely voters would rather have a partial government shutdown until Congress can agree to either cut spending or keep it the same rather than greenlight more spending with a clean debt ceiling increase.

Perhaps the key takeaway is that no one really knows what'll happen.

"We don't know how bad it would be," said Shai Akabas, director of economic policy at the Bipartisan Policy Center. "But as the preeminent leader of the global economy, no one likes to see us in position so untested."

CLICK HERE TO GET THE FOX NEWS APP

Akabas explained it's possible the issue would get resolved quickly without serious consequences.

"But there are so many risks and so much uncertainty," he said. "We need our leaders to bring both sides to the table and find compromise that can address the nation's fiscal challenges and meet our obligations. Those discussion should continue in earnest — the fewer talking points and more substantive discussions the better."